Fed Discussed Possible Housing Bubble in 2004

The Fed released transcripts from a 2004 meeting this week, and Calculated Risk notes that they mentioned a possible housing bubble, but didn't take it much farther. "Just showing the rent-to-price ratio I think would have been somewhat misleading; it’s really that gap that we think is the meaningful measure of valuation. And it looks somewhat rich, taking account of the fact that interest rates are relatively low and income growth has been relatively strong. I don’t want to leave the impression that we think there’s a huge housing bubble. We believe a lot of the rise in house prices is rooted in fundamentals. But even after you account for the fundamentals, there’s a part of the increase that is hard to explain," said Fed associate research director Stephen Oliner.